2010: No fee too low

IFR Asia - 20th Anniversary Special Issue 2017
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Anuradha Subramanyan

Share sales from the Indian government have long paid a standard fee of Rs1, but it wasn’t always that way. In 2010 when the government invited bids for the Coal India IPO it said the fees had to be quoted in multiples of Rs1 and not as a percentage of the transaction. The market was inactive post the global financial crisis and few were surprised when the Rs1 figure became the final price for a Rs155bn (US$3.5bn) IPO – the largest public listing in Indian history.

Without a floor price, it could have been even lower. Twenty years ago the government was generous having paid 3.75% fees on the Mahanagar Telephone Nigam GDR issue in 1997. But the lull in equity capital markets after September 2001 had made bankers desperate for business. As a result in 2002 when the Indian government launched an ambitious disinvestment program to meet its fiscal deficit, bankers low-balled fees to win mandates. The landmark Maruti Suzuki IPO in 2003 came with a fee of 0.00001% of the transaction size, taking the fee to below Rs1. Fee competition became an exercise of how many decimal points bankers dared add, before the government realised it had no currency units small enough to make the payment.

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